DOCSLIB.ORG

The Determinations of the Demand for Money In

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
The Determinations of the Demand for Money In Journal of Economics and International Finance Vol. 3 (15), pp. 771–779, 7 December, 2011 Available online at http://www.academicjournals.org/JEIF DOI: 10.5897/JEIF11.118 ISSN 2006-9812 ©2011 Academic Journals Full Length Research Paper The determinants of the demand for money in developed and developing countries Yamden Pandok Bitrus Department of Economics University of Jos, P. M. B. 2084, Jos, Plateau State, Nigeria. E-mail: [email protected]. Tel: 234-8032104525. Accepted 15 November, 2011 This study examined the determinants of the demand for money in developing and the developed countries. The study employed a comparative analysis of the effectiveness of the determinants of the demand for money in both developing and developed countries. It was found out that income related factors or the scale variables are more effective in the developing countries while factors that work through the financial system are more effective in the developed economies and that stock market variables should not be ignored in modeling demand for money even in emerging economies since they constitute an alternative to holding cash. The level of the development of a country’s financial system determines which factors will be relevant targets in moping excess liquidity within an economy. Key words: Demand for money, comparative analysis, excess liquidity. INTRODUCTION According to Black (2003), demand for money refers to developing countries. The rest of the paper is organized the amount of money people wish to hold or the function as follows; theories of the demand for money, determining this. In other words, it is referred to as the comparative analysis of the relevance of the desire to hold cash. The demand for money arises from determinants of the demand for money in developed and two important functions of money; medium of exchange developing countries and conclusion. and the store of value. The study of the demand for money is not restricted to the money market, but also involves other market such as the commodity, capital and THEORIES OF DEMAND FOR MONEY foreign exchange market According to Jhingan (2004), demand for money arises The purpose of the theory of demand for money is to look from two important functions of money. The first is that at the variables that motivate people to hold part of there money act as a medium of exchange and the second is wealth in money as opposed to other assets. According that it is a store of value. Thus individuals and businesses to Jhingan (2004), there are three approaches to the wish to hold money partly in cash and partly in the form of demand for money: assets. Why do individuals desire to hold money? In an attempt (1) The classical approach; (a) the equation of exchange; to answer this question, several economists made b) the cash balance (Cambridge) approach several assertions on the reason(s) why people hold (2) The Keynesian approach money. With his conceptual framework, Keynes (1936) (3) The post Keynesian approach laid the foundation for the development of all modern theories on the demand for money hence regarded as the father of modern theories of money demand. Classical approach This paper examines the contribution of various schools of thought in economist on the demand for The classical economist did not explicitly formulate money. The study then examines the relevance of the demand for money theory but they emphasized the determinants of the demand for money in developed and transactions demand for money in terms of the velocity of 772 J. Econ. Int. Finance circulation of money (Jhingan, 2004). This, according to value function of money – even though they expanded the classical economist, is because money acts as the the scope of the demand for money. Keynes, a product of medium of exchange and facilitates the exchange of Cambridge, further extended the concept of the demand goods and services. There views were expressed in the for money in two of this works on money, a trade on fishers equation of exchange; monetary reform (1923) and a treatise on money (1930). Examining why the demand for money depends MV = PQ negatively on interest rate, Keynes published “The General theory of employment, interest and money” in where, M = the quantity of money; V = its velocity of 1936. circulation; P = price level and Q = total output Keynes (1936) introduced three reasons or motives for holding money; the transactionary, precautionary and the Here, MV = Money supply, while PQ represents the speculative or portfolio motive. Each of these motives is demand for money. At equilibrium, money demand (PQ) associated with one component of the demand for money equals money supply (MV). The underlying assumption in examined by Keynes. the equation of exchange is that people hold money to buy goods and does not explain fully why people hold money. Transactionary demand for money In a slight contrast to the fisher version introduced by Irving Fisher of yale in the early 1900‟s, the Cambridge This arises from the need to hold cash for current version introduced by economist of the Cambridge personal and business expenditure. There is hardly any University of England raised a further question: why economic unit whose cash receipt perfectly matches its would individuals want to hold there assets in the form of cash payments at all times. Monthly salary earners cash?. The Cambridge demand equation for money is receive their remuneration on monthly basis, some d d represented by the equation M = KPY where M = weekly and some on bi-monthly basis but not all demand for money, K = is the fraction of real money, foodstuffs could be bought and stored up till the next incomes individuals want to hold in the form of cash, P = salary period. Even if this possible, other expenses like is the price level and Y = is the aggregate real income. transport to work and newspaper will have to be on daily Assuming a year consists of 12-4 week months, that is, basis or at shorter intervals than receipt or income. 48 weeks. Considering the case of an employee who is The situation appears similar for must business goods paid N2,800.00 once a month, or N33,600.00 a year and may have to be sold on credit or on monthly billings but who spend his income evenly – N100.00 a day – over the daily expenses have to be made. Even for government, 28 day month. The moment the individual received his most company profit tax and trading surplus of monthly income, he holds N2,800.00. The next day, he government owned corporations accrue mostly at year holds N2,700.00 (having spend N100.00) the day after he ends but again daily expenses will have to be met. The holds N2,600.00 and so on until the 28th and last day of diversity in the timing of inflow and outflow of funds the month when he spends the remaining N100.00. create the need to hold some cash to meet daily Dividing the individual‟s average money holdings of expenses till the next cash inflow period. N1,400.00 by his income (expenditure) of N2,800.00 we Therefore, the higher the level of income of an find the Cambridge “K” which is ½ which means that the economic unit, the higher will be the transactions demand individual‟s average holdings of (demand for) money is ½ for money and vice versa, hence Mt = F(Y) where F > 0. of his monthly income which is equivalent to 1/24th of his The important thing to note here is that while Keynes annual income. explicitly recognize that the transactions demand for Suppose that employees are paid once a week instead money (Mt) depends on interest rate, he argued that the of once a month, with the same income the employee will influence of interest rate was minor compared to that of receive N700.00 a week which he spends. The income individual‟s average income is N350.00 which is ½ of his weekly income and 1/96th of his annual income in cash. This demonstrates that the more frequently employees Precautionary demand for money are being paid; the lower will be their demand for money. It is evident therefore, that the Cambridge approach The precautionary demand, according to Keynes arises stressed the importance of other variables that influence from the need to provide for unforeseen event requiring the demand for money at any point in time. sudden expenditures. Unforeseen events as ill health, accidents and robbery/theft happen so sudden hence the need to hold cash to meet such unexpected cash needs. The Keynesian perspective The higher the level of income of an economic unit, the higher will be the precautionary demand for money by the According to Jhingan (2004), one of the major criticisms individual or the higher will be the money needed to meet of the Cambridge version is their neglect of the store of unexpected expenditures and vice versa. Hence Mp = Bitrus 773 F(Y), F > 0. While Keynes explicitly recognized that that individuals would hold their wealth in bonds or precautionary money demand depends on interest rate, money, that is, they would not diversify their portfolios. he argues that the influence of interest rate was minor This was remedied by Harry Markowitz and James Tobin. compared with that of real income. In addition William Baumol and James Tobin also provided the theory that explains why the transactions demand and even the precautionary demand depends on The speculative demand for money the interest rate. The speculative demand according to Keynes arises from uncertainty about future interest rate. Keynes James Tobin’s explanation emphasized risk and the uncertainty of expectations as the reasons behind the negative relationship between the Tobin noted that the Cambridge approach merely asserts interest rate and the speculative demand for money.
Load more

Recommended publications
  • Nber Working Paper Series David Laidler On
    NBER WORKING PAPER SERIES DAVID LAIDLER ON MONETARISM Michael Bordo Anna J. Schwartz Working Paper 12593 http://www.nber.org/papers/w12593 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 October 2006 This paper has been prepared for the Festschrift in Honor of David Laidler, University of Western Ontario, August 18-20, 2006. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. © 2006 by Michael Bordo and Anna J. Schwartz. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. David Laidler on Monetarism Michael Bordo and Anna J. Schwartz NBER Working Paper No. 12593 October 2006 JEL No. E00,E50 ABSTRACT David Laidler has been a major player in the development of the monetarist tradition. As the monetarist approach lost influence on policy makers he kept defending the importance of many of its principles. In this paper we survey and assess the impact on monetary economics of Laidler's work on the demand for money and the quantity theory of money; the transmission mechanism on the link between money and nominal income; the Phillips Curve; the monetary approach to the balance of payments; and monetary policy. Michael Bordo Faculty of Economics Cambridge University Austin Robinson Building Siegwick Avenue Cambridge ENGLAND CD3, 9DD and NBER [email protected] Anna J. Schwartz NBER 365 Fifth Ave, 5th Floor New York, NY 10016-4309 and NBER [email protected] 1.
    [Show full text]
  • Intermediate Macroeconomics: New Keynesian Model
    Intermediate Macroeconomics: New Keynesian Model Eric Sims University of Notre Dame Fall 2014 1 Introduction Among mainstream academic economists and policymakers, the leading alternative to the real business cycle theory is the New Keynesian model. Whereas the real business cycle model features monetary neutrality and emphasizes that there should be no active stabilization policy by govern- ments, the New Keynesian model builds in a friction that generates monetary non-neutrality and gives rise to a welfare justification for activist economic policies. New Keynesian economics is sometimes caricatured as being radically different than real business cycle theory. This caricature is unfair. The New Keynesian model is built from exactly the same core that our benchmark model is { there are optimizing households and firms, who interact in markets and whose interactions give rise to equilibrium prices and allocations. There is really only one fundamental difference in the New Keynesian model relative to the real business cycle model { nominal prices are assumed to be \sticky." By \sticky" I simply mean that there exists some friction that prevents Pt, the money price of goods, from adjusting quickly to changing conditions. This friction gives rise to monetary non-neutrality and means that the competitive equilibrium outcome of the economy will, in general, be inefficient. By “inefficient" we mean that the equilibrium allocations in the sticky price economy are different than the fictitious social planner would choose. New Keynesian economics is to be differentiated from \old" Keynesian economics. Old Keyne- sian economics arose out of the Great Depression, adopting its name from John Maynard Keynes. Old Keynesian models were typically much more ad hoc than the optimizing models with which we work and did not feature very serious dynamics.
    [Show full text]
  • The Quantity Theory, Inflation, and the Demand for Money
    Quantity Theory, Inflation, and the Demand for Money This lecture examines the link between the quantity theory of money and the demand for money with special emphasis placed on how much the quantity of money demanded is affected by changes in the interest rate. The Classical Quantity Theory of Money A. Velocity of money and the equation of exchange 1. The velocity of money (V) is the average number of times per year that a dollar is spent buying goods and services in the economy , (1) where P×Y is nominal GDP and MS is the nominal money supply. 2. Example: Suppose nominal GDP is $15 trillion and the nominal money supply is $3 trillion, then velocity is $ (2) $ Thus, money turns over an average of five times a year. 3. The equation of exchange relates nominal GDP to the nominal money supply and the velocity of money MS×V = P×Y. (3) 4. The relationship in (3) is nothing more than an identity between money and nominal GDP because it does not tell us whether money or money velocity changes when nominal GDP changes. 5. Determinants of money velocity a. Institutional and technological features of the economy affect money velocity slowly over time. b. Money velocity is reasonably constant in the short run. 6. Money demand (MD) a. Lets divide both sides of (3) by V MS = (1/V)×P×Y. (4) b. In the money market, MS = MD in equilibrium. If we set k = (1/V), then (4) can be rewritten as a money demand equation MD = k×P×Y.
    [Show full text]
  • Cyclical Unemployment and Policy Prescription True to Keynes, We Tell Our Story Peak to Peak
    TIME AND MONEY fact that his discussion of cyclical variation is relegated to Book IV of the General Theory, titled “Short Notes Suggested by the General Theory,” and, more specifically, to a chapter entitled “Notes on the Trade Cycle.” Allowing cyclical unemployment to be the whole story as told with the aid of Figures 7.1 through 8.4 is strictly a matter of heuristics. After we have turned from the issues of cyclical unemployment and stabilization policy to the 8 issues of secular unemployment and social reform, we can easily transplant our entire discussion of business cycles into the context of an economy that is suffering from ongoing secular unemployment. Cyclical Unemployment and Policy Prescription True to Keynes, we tell our story peak to peak. Unlike the boom-begets- bust story that emerges from the capital-based macroeconomics of Chapter 4, the story told by Keynes opens with the bust. The onset of the crisis takes the FROM ACCIDENT TO DESIGN form of a “sudden collapse in the marginal efficiency of capital”–the Beginning with “Full Employment by Accident,” depicted in Figure 7.1, and suddenness being attributable to the nature of the uncertainties that attach to ending with “Full Employment by Design,” depicted in Figure 8.4, we deal long-term investment decisions in a market economy. The crisis is illustrated with the issues of market malady and fiscal fix in terms of the phases (peak-to- in Figure 8.1, “Market Malady (a Collapse in Investment Demand).” The peak) of the business cycle. The sequence of cause and consequence is tailored collapse is shown in Panel 6 as a leftward shift (from D to D’) in the demand to Keynes’s treatment of business cycles in Chapter 22 of the General Theory, for investment funds.
    [Show full text]
  • The Great Debate: Inflation, Deflation and the Implications for Financial Management
    issue 8 | 2011 Complimentary article reprint The Great Debate: Inflation, Deflation and the Implications for Financial Management by Carl STeidtmann, Dan laTIMore anD elISabeTh DenISon > IllustraTIon by yuko ShIMIzu This publication contains general information only, and none of Deloitte Touche Tohmatsu, its member firms, or its and their affiliates are, by means of this publication, render- ing accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your finances or your business. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. None of Deloitte Touche Tohmatsu, its member firms, or its and their respective affiliates shall be responsible for any loss whatsoever sustained by any person who relies on this publication. About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Copyright © 2011 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu Limited 76 As the economy bounces between recession and recovery, financial executives have to make a bet between whether the economy, their industry and their business will ex- perience rising prices going forward or whether they will have to grapple with the balance sheet and oper- ational effects of deflation.
    [Show full text]
  • 15.012 Lecture 3, the IS-LM Model
    Simple Notes on the ISLM Model (The Mundell-Fleming Model) This is a model that describes the dynamics of economies in the short run. It has million of critiques, and rightfully so. However, even though from the theoretical point of view it has some loopholes, it continues to be an excellent way of analyzing and understanding the behavior of economies. Robert Solow once was asked: “Professor Solow when were at the Counsel of Economic Advisors, what of all your knowledge did you use the most?” He answered something like this: “Well you just need the Dornbusch and Fischer, but you have to use it right.” The Dornbusch and Fischer is essentially the ISLM model. In practical policy making the ISLM dominates at least 50 percent of discussions. The most important assumption required for this model to work is that prices (and in particular wages) are fixed or predetermined in the short run. This model has two schedules that reflect the equilibrium in two markets: goods and money. In other words, one schedule represents the market in which the supply of goods is equal to the demand of goods, and the other schedule represents the market in which the supply of money is equal to the demand of money. Now let us see what happens when we have a model that has these ingredients… Model for a closed economy. First assume that the economy is closed. This will help us better understand the basic model; later we will proceed with the more complicated version when there are international transactions on goods and capital.
    [Show full text]
  • Why Has Deflation Continued Under Extraordinary Monetary Expansion?
    PDPRIETI Policy Discussion Paper Series 19-P-028 Why has Deflation Continued under Extraordinary Monetary Expansion? KOBAYASHI, Keiichiro RIETI The Research Institute of Economy, Trade and Industry https://www.rieti.go.jp/en/ RIETI Policy Discussion Paper Series 19-P-028 October 2019 Why has deflation continued under extraordinary monetary expansion?1 Kobayashi, Keiichiro The Tokyo Foundation for Policy Research, RIETI, Keio University, CIGS Abstract We propose a theoretical argument for a new rational expectations equilibrium hypothesis in the intergenerational economy, where each generation is intergenerationally altruistic and rational. The intergenerationally-rational expectations equilibrium implies that deflation can continue under an extreme increase in money supply. Keywords: Deflationary equilibrium, transversality condition, zero nominal interest rate policy. JEL classification: E31, E50, The RIETI Policy Discussion Papers Series was created as part of RIETI research and aims to contribute to policy discussions in a timely fashion. The views expressed in these papers are solely those of the author(s), and neither represent those of the organization(s) to which the author(s) belong(s) nor the Research Institute of Economy, Trade and Industry. 1I thank Makoto Yano and seminar participants at Research Institute of Economy, Trade and Industry (RIETI) for encouraging and useful comments. All remaining errors are mine. This study is conducted as a part of the Project “Microeconomics, Macroeconomics, and Political Philosophy toward Economic Growth” undertaken at RIETI. 1 1. Transversality condition and the velocity of money Observing the monetary policy in Japan for the last three decades, we have a question whether the velocity of money may be endogenous and responsive to the policy changes.
    [Show full text]
  • Population Ageing and Inflation with Endogenous Money Creation
    Population Ageing and Inflation with Endogenous Money Creation Igor Fedotenkov DP 03/2016-013 Population ageing and inflation with endogenous money creation Igor Fedotenkov1 Bank of Lithuania Abstract This paper provides an explanation as to why population ageing is associ- ated with deflationary processes. For this reason we create an overlapping- generations model (OLG) with money created by credits (inside money) and intergenerational trade. In other words, we combine a neoclassical OLG model with post-Keynesian monetary theory. The model links demographic factors such as fertility rates and longevity to prices. We show that lower fertility rates lead to smaller demand for credits, and lower money creation, which in turn causes a decline in prices. Changes in longevity affect prices through real sav- ings and the capital market. Furthermore, a few links between interest rates and inflation are addressed, they arise in the general equilibrium and are not thoroughly discussed in literature. Long-run results are derived analytically; short-run dynamics are simulated numerically. JEL Classification: E12, E31, E41, J10 Keywords: Population ageing, inflation, OLG model, inside money, credits. 1Economics Department, Bank of Lithuania. Totoriu str. 4, Vilnius, Lithuania. +370 603 26377 [email protected], [email protected] The views expressed are those of the author and do not necessarily represent those of the Bank of Lithuania. 1 Introduction Deflation is usually supposed to be harmful, because people expecting a decline in prices have incentives to cut their spending, thus reducing economic activity and leading to economic stagnation. Economic stagnation reduces incomes and induces a further decline in spending.
    [Show full text]
  • Inside-Money in the New Keynesian Model
    Inside-money in the New Keynesian model Cristina Manea∗ † December 4, 2019 Incomplete Draft Link to the latest version Abstract The textbook New Keynesian framework has become a common tool for monetary policy analysis in central banks. Policymakers are nonetheless often concerned that this framework abstracts away from endogenous money creation, and lacks realism. To address this concern, I introduce endogenous money creation by the private banking sector (like deposits), or “inside money”, into the textbook framework. I find that the new “inside money” model has the same equilibrium representation as the textbook ‘money-less” one, and hence transmission and optimal design of monetary policy in the two models are identical. Keywords: New Keynesian model, inside-money, cashless, inside-liquidity banking theory JEL Class.: E2 – E3– E4 ∗Universitat Pompeu Fabra. Email: [email protected]: https://www.upf.edu/web/econ/manea-cristina †I thank my PhD advisor Jordi Gali and Piti Disyatat for comments. 1 1 Introduction A number of economists have expressed concerns over the lack of explicit account of banks’ monetary role in New Keynesian models widely used for monetary policy analysis. These concerns are expressed on two dimensions. On a first dimension, they regard the monetary fundamentals of cashless versions of these models, because they do not explicitly model the role of bank deposits (’inside-money’) in transactions. For instance, Goodfriend and McCallum (2007) consider the New Keynesian framework in Bernanke, Gertler and Gilchrist (1999) as ’fundamentally non-monetary’ because ’it does not recognize the existence of a demand for money that serves to facilitate transactions’.
    [Show full text]
  • Unit 12: Demand for Money: Keynes' Approach
    Demand for Money: Keynes’Approach Unit-12 UNIT 12: DEMAND FOR MONEY: KEYNES' APPROACH UNIT STRUCTURE 12.1 Learning Objectives 12.2 Introduction 12.3 Keynes' Liquidity Preference Approach 12.3.1 Demand for Money 12.3.2 The Demand for money and The Liquidity Preference Curve 12.3.3 Money Supply 12.3.4 Determination of Equilibrium Rate of Interest 12.3.5 Liquidity Trap 12.4 Friedman's Reformulation of the Quantity Theory of Money 12.4.1 Limitations of Friedman's Reformulation of the Quantity Theory of Money 12.4.2 Friedman vs Keynes 12.5 Criticisms of the Liquidity Preference Theory 12.6 Let Us Sum Up 12.7 Further Reading 12.8 Answers to Check Your Progress 12.9 Model Questions 12.1 LEARNING OBJECTIVES After going through this unit, you will be able to- to discuss Keynes'Liquidity preference theory of demand for money to explain how the rate of interest is determined using the liquidity preference theory of the demand for money to discuss Friedman's reformulation of the quantity theory of money make a comparison between Keynes and Friedman's approaches trace the limitations of the Keynes's theory liquidity preference theory of money. Macro Economics - I 217 Unit-12 Demand for Money: Keynes’Approach 12.2 INTRODUCTION In the previous Units we have the Classical approach to demand for money. In this unit, we shall discuss the Keynesian theory of demand for money, particularly relating to the liquidity preference approach. The Reformulation of Friedman's Quantity theory of money has also been discussed, and a comparison between the Keynesian approach and the Friedman's approach has been made.
    [Show full text]
  • The Demand for Endogenous Money: a Lesson in Institutional Change
    The Demand for Endogenous Money: a Lesson in Institutional Change Peter Howells University of the West of England, Bristol 1. Introduction When Davidson and Weintraub (1973) first drew attention to the endogenous nature of the money creation process they were responding to a quantity theory analysis of inflation which was popular at the time. But although their paper was a landmark in the cogency with which it put the case (and in putting it forward in a leading ‘mainstream’ journal), it was not the first to argue that a country’s money stock might be elastic with respect to the needs of trade. Traces of this view can be found in debates over the cause of inflation in Tudor and Stuart England and in the ‘banking’ and ‘bullionist’ controversies of the nineteenth century. Neither was it the last of course. In later years Chick (1986), Dow (1993), Howells (1995), Kaldor (1982, 1985), Lavoie (1984), Niggle (1991), Pollin (1991), Wray (1990) and others have all supported and refined this fundamental proposition. The greatest campaigner, however, has been Basil Moore whose 1985 book took the argument (and the evidence) to unprecedented levels of detail. So secure have the fundamentals of the argument become, that the literature in recent years has been entirely preoccupied with refinements. Furthermore, as central banks have placed a growing premium on the ‘transparency’ of their operations, it has become clear beyond the slightest doubt that central bankers regard the money supply as endogenously determined and that they accept their own role in making it so. Charles Goodhart, whose work has for years combined the analytical insights of economics with a keen appreciation of the practice of central banking has done as much as anyone to encourage a realistic approach to money supply analysis and has largely succeeded in the UK at least, by frequently denouncing the ‘misinstruction’ inherent in the base-multiplier model (Goodhart, 1984, p.188).
    [Show full text]
  • Comments on a Monetarist Approach to Demand Management
    Comments on a Molietarist Approach to Demand Management by ROBERT H. RASCHE Robert H. Rasche is Assistant Professor of Economics at the Wharton School of Finance and Commerce, University of Pennsylvania. Tie received a PhD degree in Economics from the Uni- versity of Michigan. Professor Rasehe has been closely involved in the development o/the FRB- MIT econometric model of the United States economy. The author is on leave during the 1971- 72 academic year and is a viiiting scholar at the Federal Reserve Bank of St. Louis. This paper was presented at the Annual Conference of College and University Professors of the Federal Reserve Bank of St. Louis on November 12, 1971. iT. CASUAL reading of the popular discussion of The question is what theoretical framework can stabilization pohey over the past four or five years produce these types of conclusions, and can it be would suggest that the definition of a monetarist was tested? Again quoting the Andersen paper, “monetary firmly established. In the monetarist camp are Milton actions .. .are considered a disturbance which infhj- Friedman, Karl Brunner, Allan Meltzer, and the model enees the acquisition of financial and real assets. Rates of the St. Louis Federal Reserve Bank. Among the of rethrn on real and financial assets and market prices nonmonetarists are Waiter Heller, Gardner Ackley, adjust to create a new equilibrium position of the Arthur Okun, James Tobin, and the large econome- economy; therefore these changes are considered the tric models such as the Wharton model and the FRB- main channels of monetary influence on aggregate MIT model.
    [Show full text]